The US manufacturing sector grew at a cooler pace in May while concerns increased about prices for raw materials, the Institute for Supply Management reported today.
The ISM manufacturing index dipped to 54.4 in May from 57.3 in April. Readings above 50 indicate expansion, so the report showed growth in the industrial economy, but at a slower pace than the previous month. The report was slightly weaker than Wall Street expectations.
Among component indexes in the ISM report, new orders fell to 53.7 from 57.6 in April. The employment reading of new hirings in industry declined to 52.9 from 55.8. Prices grew faster to an index reading of 77 from 71.5 in April.
'The slower growth is evidenced by a significant loss of momentum in the last four months as the new orders index has slipped from 61.9 in February to 53.7 in May. Prices, driven by raw materials costs, are a concern,' said ISM survey chief Norbert Ore.
Meanwhile, US business productivity was stronger than first thought in the first quarter and labour costs were much better contained, the government said today in a report that tempered inflation jitters in financial markets.
A second report showing an unexpected rise in initial claims for jobless benefits also helped ease worries a tight job market could drive up wages and fuel inflation.
The US Labor Department said nonfarm business productivity advanced at a revised 3.7% annual rate in the first three months of the year, compared to an initially reported 3.2% increase.
Unit labour costs, a key gauge of price and profit pressures, rose at only a 1.6% annual rate in the first quarter, a downward revision from the 2.5% gain reported last month. The department also revised fourth-quarter unit labour costs sharply lower to a 0.6% drop from the previously reported 3% rise.
Wall Street economists expected first-quarter productivity would be revised up to an even stronger 3.9% gain, but the downward revision to unit labour costs was sharper than anticipated. Economists had looked for unit labour costs to rise at a 1.9% pace.
